Voices from the Customer Success Space (Part 2)
by Anya Breen
“CS isn't a ‘nice to have’, it is essential for any SaaS organisation that wants to be built to last. A singular focus on new logos, without a proper structure in place to protect your base is like trying to fill a leaking bucket.” Rosanna Zrnic - Director of Customer Success
The past year has been challenging for the tech industry as a whole, but some areas have been harder hit than others. Customer Success (CS) in particular, across many companies, has been battered by layoffs and reorganisations in what some have termed the ‘anti-CS department trend’.
In part one of this three-part series I spoke to CS leaders across the industry to get their views on why CS has been so badly impacted by recent layoffs. One of the key reasons articulated was a lack of understanding by executive leadership of the value that CS brings to an organisation, and its contribution to profitability.
So, what is CS’s contribution to profitability? 10 leaders from within CS from Canada, the US, the UK, and Germany shared their views with me, which I have summarised below.
CS is a vital component of profitability. Research by Bain & Company shows that increasing customer retention rates by 5% increases profits by 25-95%. A recent WbD research paper demonstrates the overlooked exponential growth potential that comes as a result of the myriad of ‘multiplier’ factors influenced by CS. Whereas a sales process is finite, CS has ongoing revenue expansion potential.
A lot of this, particularly for more technical CS organisations, has to do with the customer’s awareness of the ROI on their investment, a point that was also highlighted by multiple executives I spoke to:
“Customers will keep your software if they're getting success out of it, and value out of it, and they're reaching outcomes. The job of the CSM is to prove and get the customer to acknowledge that they are achieving the outcomes that they set out to achieve. If you do that, the renewal conversation, the growth, the expansion - all of those things become a lot easier.” Simon Smith - Head of Customer Success, ENSEK
However, many companies treat CS as a cost centre not a profit centre. They focus purely on the operational metrics of customer success such as loyalty scores, churn rates and headcount; as opposed to employing revenue metrics such as upsell, cross-sell and advocacy influence.
The direct impact of these more commercial factors on the Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV) were highlighted again and again by the CS leaders I spoke to. Katie Savino at Planhat provided the following slide explaining the link between churn and CLV:
“As you can see, as churn goes up, the lifetime value of your ARR can go down exponentially. And similarly, by continuously growing and upselling your existing customers, lifetime value has the opposite exponential effect.” Katie Savino - Director of Customer Success, Planhat
Billal Malik at Onfido also explained the ways in which the CS function has evolved from traditional account management to much broader roles bringing much greater value to businesses.
“CSMs are now dynamic professionals leading the charge in growing customer satisfaction and loyalty, building process-driven relationships to drive customer adoption, expansion, education, retention, usage and brand advocacy, all whilst being project managers to meticulously understand and translate customers' needs and problems back into their own business.” Billal Malik - Customer Success Director, UK & I, Onfido
This is reflective of a broader shift in CS functions towards more commercial metrics, more digital functions, and paid CS plans. These in turn can serve to place a clear value on CS orgs where CS remains a technical or operational function.
In sum, CS should be a central asset, not a casualty, in the quest for profitability. There was strong consensus on this across the CS leadership I spoke with. However, there is much more to be done to demonstrate and communicate that value to executive leaders across the sector.
In part three of this three-part series I address the question: how can leaders better emphasise the value of CS to executive leadership?
Thank you to Billal Malik (Customer Success Director, UK & I at Onfido), Joe Christian Balcazar (VP Operations at Portage CyberTech), André Krüger (Head of Customer Success EMEA - DACH & EE at CyberArk), Simon Smith (Head of Customer Success at ENSEK), Rosanna Zrnic (Former Director of Customer Success at Security Compass), Leonardo Neves (Senior AM Team Lead EMEA at Shutterstock), Matt Lane (Director of Customer Success at Cyncly), Katie Savino (Customer Success at Planhat), Diana May (Director of Customer Success at Bonterra) and Ciaren Diante (Head of Customer Success at Capsule) for your invaluable contributions to this article.